It is THAT time of the year again. On the first of February, 2021, the Finance Minister Nirmala Sitharaman will lay down the financial-cum-developmental roadmap for this year by presenting the budget in the parliament, like it has been done for the past decades. So, what is different this time?
They’ve never been higher.
2020, as year, was certainly VERY eventful, to say the least. The amount of turmoil COVID-19 implicated upon every single component of the globalist architecture is pretty apparent. Now that the water is under the bridge, albeit partially, a gargantuan task lies ahead of every single nation, especially India. The incredulous task to rebuild, not just on shoddy foundations comprised of bailing-out mega-corporations, but on a robust trajectory, which happens to be ‘Antifragile’, in the words of Nassim Nicholas Taleb.
So, what does the common man, the average tax-paying and law-abiding citizen expect from this year’s budget proposal?
It is pretty much a universal agreement between every analyst and average consumer/citizen alike that the economic output of various sectors needs to be brought back up to pre-COVID19 levels, AT LEAST. And it certainly makes a lot of sense to aim for that minimum baseline.
The top-most expectation of the tax-payer would be ‘lower-taxes’, ironically, as every citizen genuinely wants and needs more to spend for themselves, but that’s not all.
Let us begin with the results of some surveys undertaken by independent think-tanks regarding the average citizen’s outlook regarding taxes and what taxation policies should be undertaken in the 2021 budget. Around 40% of the surveyed populace stresses on the fact that tax-relief should be the theme around which the entire 2021 budget is built upon. This actually makes a lot of sense as it is pretty apparent that literally everyone’s income has been negatively impacted due to the widespread lockdowns. It also carries a lot of weight, as nearly half the population is desperate for some much-needed financial respite.
47% of the sample had their major demand to be that of widening of the tax-slabs. Since inflation does not seem to reduce in the coming financial year(s), the growth in the income of salaried individuals will be limited and it will certainly impact their spending powers. Widening the tax-slabs can help in dampening the effect of inflation on their incomes by giving them more disposable income and thereby improving the consumption rates. On top of that, an increase in the threshold for income not liable to tax can also put more money in the pockets of consumers. The survey also points out that 53% of the sample seeks tax exemptions for the ‘Research and Development’ and ‘exports’ sectors along with tax incentives for employment generation.
Promoting insurance policies:
A substantial subset of the Indian population became aware of the importance of having health/life insurance, due to the COVID-19 pandemic. A major illness inflicted upon even a single member of a family can severely drain their savings and push them into severe financial distress.
The above scenario also happens to be a very legitimate call for an increase in the tax deduction limit, in which a person can currently claim up to Rs.25,000 for self and/or family. These claims can be deposited in a health insurance policy.
Insurance experts agree on the fact that enhancing the insurance policies and increasing tax deduction limits will further encourage people to opt for health/life insurance. This holds significant importance in a country like India as it has limited social security measures.
More standardized health insurance products which also happen to be affordable need to be rolled out, similar to the likes of the presently existing ones such as Corona Rakshak plan and the Arogya Sanjeevani plan. On top of that, a reduction in the GST rate for insurance policies, which currently is 18%, can do wonders in the insurance sector as well as provide the general consumer the go ahead to purchase health insurance.
There also exists the possibility of imposing a ‘COVID-19 cess’ on the high-income tax-bracket in order to fund the largest vaccination drive ever which our country happens to be going through right now.
Infrastructure, employment, consumption rates and household savings:
Secondly, the infrastructure problem. Even if this issue does not directly impact the common man per-se, but indirectly, it radiates to every single sector of the economy.
Grab hold of a random passer-by on the street and ask them about their expectations from the budget. 9 out of 10 times, they would whine about India having an unbalanced ratio of infrastructural development. You’ve got places that are at par with the global-standards, and some barren land right next to it. Shift the timeline a decade back, and ask the same question to another passer-by, and he will whine about the same. Repeat the above, ad-infinitum.
Lack of infrastructural development has been an evergreen and a ubiquitous issue since time immemorial. We have certainly seen significant infrastructural advancements in the past decade, but a humongous effort needs to be made to further accelerate this.
Looking at the past decisions regarding the construction of many more national highways, the bullet-train project, intra-city metro projects being set up in every other metropolitan city, it isn’t hard to imagine what to expect this time. In the last budget session, the Centre launched the National Infrastructure Pipeline which had a target to complete 7300 infrastructural projects at a total cost of Rs.111 lakh crores in the 2020-25 timeline. It is likely that any new provisions will be implemented on top of this offering.
It would also generate lakhs of jobs, and would certainly play a part in easing the unemployment problem throughout the nation. More money in the pockets of the construction-workers, site-managers, machine-operators would mean more money for them to spend, which would then drive up the demand in various sectors related to consumption of products.
One can imagine the cyclical impact this would have and how it will radiate towards more savings as well. Depleting household savings have also been an issue for the past few years now. In order to fund future growth in the consumption sector, household savings need to be promoted as Indians happen to be financially conservative in general, we really need some reason to buy that new *insert product*.
Real-estate and housing:
The government also seems to be venturing into the social-housing arena. An all-encompassing example of that would be the Pradhan Mantri Awaas Yojna, which plans on providing affordable housing to the economically-weak. It is worthy to note that the Home Minister Amit Shah made some statements in the past few weeks saying that they plan on providing every family with a house by 2022. Keeping this in mind, one can expect real-estate measures to receive significant attention in the budget.
The affordability of housing projects has been severely constrained in the past few years, and it has only been aggravated more due to the pandemic. It can be expected that the Centre, through the budget, takes steps to increase affordability by expanding the income-tax benefits already provided to home-owners with extra emphasis being directed at first-time buyers.
On top of that, relaxation in stamp-duty proceedings, enhancing the income tax sops for income generated through renting a housing property and by reducing or altogether removing the notional rent income, they can certainly provide enough incentive for prospective home-buyers to take the next step and also make the market more approachable to prospective tenants.
All in all, it is a tight-rope walk. There exists a dire need to prioritize growth-oriented measures which happen to be robust and sustainable over fiscal considerations and monetary infusions. The entire budget needs to revolve around generating employment in record numbers as India’s young population needs and certainly wants to work, and put more cash in their hands to shift the economy into top-gear and drive both demand and growth to previously unforeseen figures.
The nation is presented with a top-tier opportunity to shape its economic trajectory for at least the next 2 decades. All that the current administration needs to focus on is vastly improving the ease of doing business, easing tax rates and the most important of all,
Utilize the complete work potential of the young, employable and capable population, and set India up on the journey of becoming a global manufacturing hub.